Things To Know For Investing In Dubai Property As A Foreigner

Potential Risks Of Investing In Dubai Property Market

An Investors’ Paradise

That is what Dubai seems like with its low to no tax applications, affordability as well as its welcoming investment climate and economic hub.

But everything is not as it seems. There are some risks involved when investing in the hot Dubai real estate market. Plus, you need to be ready for the challenges that are a part of international investing.

Keep reading to find out what those risks and challenges are and see if you are up to meeting them all.

Dubai Real Estate Investment Risks And Challenges

1. Location

Always a challenge no matter where you buy your property. In Dubai, the wrong location means that your investment will not grow as fast as it would if you bought in a more desirable neighbourhood.

Before you buy, do some research and check for amenities, security, safety, as well as public transportation to see if they meet your standards. If your chosen location lacks any of these and other options, then it may not be the best location to invest in.

2. Continuous Maintenance & Service Fees

Property tax and insurance are just two of the fees you need to continue to pay when you own the property. Plus, you will always have to spend money on upkeep which adds to your ownership expenses.

Make sure the fees, etc., will not impact your ROI that much before buying. The good news is that all associated fees are much lower in Dubai than in other cities in the world.

3. Exchange Rates

Fortunately, the UAE Dirham is pegged to the US dollar so the currency market fluctuations should not be that large. However, when those fluctuations occur, you face the risk of losing the monetary value of your investment.

The other side of the coin is that some fluctuations can actually add value to your real estate investment boosting your ROI in the long run.

4. Construction Delays

This only is a risk if you are planning to buy a home that is not finished yet. Or the overall development has been delayed due to various factors. The best way to avoid this problem is to buy from a reputable developer.

Make sure to monitor the progress of the development so you can protect your financial planning from these delays. The handover delays may affect your move-in date or your renter’s move-in date. That will cut into some of your reserves if you are not careful.

5. Picking The Wrong Mortgage Option

This is always a risk with so many financial institutions working hard to get your business. Watch those interest rates as higher mortgage rates will cost you more money.

Another risk is picking the wrong mortgage term. This error will also affect your ROI in the long run. If you are not careful in selecting your mortgage, you may end up with a penalty for early payment.

6. More Supply Than Demand

Oversupply is always a risk especially in Dubai as developers are taking advantage of the hot real estate market in that city. With more houses on the market, your investment will not be as valuable as it could be.

Also, you may not be able to rent the place out for as much as you would like. Too high of a rental fee sends potential renters looking for cheaper options. Check the demand for property in the neighbourhoods you want to invest in to see that there is no oversupply that will damage your home’s value.

7. High Competition

Currently, there is a great demand for Dubai property. While this is a good sign that the market is remaining hot and values are up, it is also a negative influence.

Homes, villas, and apartment costs can be driven up because of the large demand in those popular neighbourhoods. You do not want to be caught in a bidding war where the price you pay negates any ROI on the investment.

8. Regulations and Restrictions

Dubai is not a free-for-all when it comes to real estate. The city has strict restrictions on property ownership and expats may not qualify for the best options. They may miss out on property types, and financing options that make investing lucrative.

Also, the process of buying property in Dubai is complicated with a variety of parties involved in every step of the process. To avoid these issues work with a reputable estate agency and research real estate ownership laws and restrictions before buying.

9. Market Fluctuations

Dubai’s real estate market is like any other city’s real estate industry. The market can change very quickly and without notice. Plus, with Dubai, you have to watch out for changes in the real estate laws as they happen all the time.

Some of the factors involved in the Dubai real estate market include changing government policies, global economic situations, and the movement of oil prices on the stock market. Plus, the market can cool at any time.

Reduce The Risks

No real estate market is free from risks. But there are always ways to be aware of those risks and solutions to the problems they create. Do your research on the developers, neighbourhoods, as well as the property to make sure you are minimizing your risks.

Do not forget to learn all the laws involved in purchasing property as an expat in Dubai. If you violate a law, that act can trigger legal challenges down the road when you want to re-sell the property.

Some Additional Words

It takes a sharp eye to see all the risks and know how to avoid them. One of the best ways to do this is to use reputable estate agents who know the Dubai real estate market.

Our firm has over 10 years of real estate experience in Dubai’s real estate market and we employ reputable and knowledgeable estate agents who know those risks and how to solve them before they become a problem.

Call us today when you are ready to invest in Dubai and let our agents make your investment safe.

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